The Portuguese online sports betting market is officially open for business once again.
The Serviço de Regulação e Inspeção de Jogos (SRIJ) has issued its first online gaming license to the European operator Betclic.
The Portuguese market has effectively been closed to major online sportsbook operators since the country passed new gambling laws in April of 2015. The SRIJ insisted that any operator expecting to be awarded an online gaming license must immediately exit the market.
Betclic’s license means that the process of re-opening the market has begun.
The license was issued to BEM Operations Ltd, a subsidiary of the Betclic Everest Group which is owned by the Lov Group and La Société des Bains de Mer — the organization that operates gambling for the Principality of Monaco.
Sportsbooks may have to operate without a poker vertical
Only sports betting is permitted by the license, although in other regulated jurisdictions the Betclic group also operates online poker. In April, EverestPoker.fr closed with players moved to Betclic.fr. Both rooms were on the iPoker France network.
The Portuguese laws don’t allow for online poker networks to be licensed, so the only online poker operators to enter the market will be those with their own platforms.
This means that Betclic and some of the other operators likely to enter the market, such as Betfair, will have to make their profits from online sports betting alone.
And therein lies the rub.
Gaming taxes are almost commercially unviable
The new laws impose a turnover tax of between 8 percent and 16 percent on sports betting. The precise rate is calculated on total turnover.
Companies with turnover below €30 million pay 8 percent; the rate increases proportionally with turnover to a maximum of 16 percent. Turnover includes both the total wagers and any charges levied by the operator.
Calculating gaming tax on turnover rather than gross gaming revenue creates an extremely high rate of tax. This may not be surprising since the new laws were ordered to be implemented by the European Union as part of the conditions for a bailout package Portugal needed as the result of its fiscal crisis.
The decision may well be self-defeating, as high taxes will both deter operators and players. If experience in other highly taxed jurisdictions is a guide, many will desert the regulated market to make cheaper bets, which will be offered by offshore operators.
The Remote Gambling Association (RGA) lobbied hard against the taxes. In a statement, the RGA said:
“Whilst the RGA welcomes the initiative of the Portuguese government in deciding to regulate the Portuguese online gambling market, the proposed punitive taxes on stakes of 8-16% for online sports betting in the present draft law will render the market unviable for the vast majority of online operators who might otherwise decide to apply for licences and invest in Portugal.”
Santa Casa da Misericórdia de Lisboa has a tax advantage
The situation may be made worse by the recent decision of the Santa Casa da Misericórdia de Lisboa (SCML) to apply for a license.
Before the new laws, the SCML had a legal monopoly on gambling. The religious organization is a charity that funds hospitals, health care and residential homes for the elderly from its gambling profits.
In order that the SCML should not find itself financially disadvantaged under the new gaming regulations, the laws make provisions for the organization that mean it will make tax payments that are around 50 percent lower than other licensed operators.
In 2015, SCML took in €2.24 billion in bets, lottery sales and other income, so it is a well-known brand and a major player in the market.
Amaya could be the beneficiary of market concentration
Amaya has filed a license application for PokerStars to operate in the regulated online poker market, and while unconfirmed, it is also expected to apply for a sports betting license for BetStars.
The taxes for online poker are based on gross gaming revenue, although they are also at the high end of the scale, having been set at 15 percent rising to 30%. These, combined with the small 10.4 million population of Portugal, can expect to produce a market highly concentrated between a few successful operators.
In Spain, over 90 percent of online poker revenues (paywall) go to PokerStars and 888poker, with PokerStars being by far the dominant operator. Spain is a much larger market than adjacent Portugal, with a population of over 46 million.
If similar dynamics transfer across to the Portuguese market, Amaya could find itself in a powerful position where it becomes the dominant online poker operator and can use that popularity to capture a large slice of the online sports betting market.